James Earp Appraisal Service can help you remove your Private Mortgage Insurance

When getting a mortgage, a 20% down payment is typically the standard. Since the risk for the lender is often only the remainder between the home value and the amount due on the loan, the 20% supplies a nice cushion against the expenses of foreclosure, reselling the home, and typical value changeson the chance that a purchaser defaults.

During the recent mortgage upturn of the mid 2000s, it became widespread to see lenders requiring down payments of 10, 5 or sometimes 0 percent. How does a lender endure the increased risk of the small down payment? The solution is Private Mortgage Insurance or PMI. This supplementary plan takes care of the lender in case a borrower doesn't pay on the loan and the worth of the property is less than the loan balance.

PMI can be costly to a borrower because the $40-$50 a month per $100,000 borrowed is rolled into the mortgage monthly payment and generally isn't even tax deductible. It's lucrative for the lender because they collect the money, and they get the money if the borrower is unable to pay, separate from a piggyback loan where the lender takes in all the deficits.

Does your monthly mortgage payment include PMI? Contact us, you may be able to save money by removing your PMI.

How buyers can avoid bearing the expense of PMI

The Homeowners Protection Act of 1998 forces the lenders on nearly all loans to automatically stop the PMI when the principal balance of the loan reaches 78 percent of the beginning loan amount. Smart home owners can get off the hook a little earlier. The law states that, at the request of the homeowner, the PMI must be dropped when the principal amount equals only 80 percent.

It can take countless years to get to the point where the principal is just 20% of the original amount of the loan, so it's necessary to know how your home has appreciated in value. After all, all of the appreciation you've accomplished over the years counts towards dismissing PMI. So what's the reason for paying it after the balance of your loan has dropped below the 80% mark? Your neighborhood may not be heeding the national trends and/or your home may have acquired equity before things calmed down, so even when nationwide trends predict decreasing home values, you should understand that real estate is local.

A certified, licensed real estate appraiser can help home owners understand just when their home's equity rises above the 20% point, as it's a difficult thing to know. It's an appraiser's job to keep up with the market dynamics of their area. At James Earp Appraisal Service, we're masters at determining value trends in Raleigh, Wake County and surrounding areas, and we know when property values have risen or declined. Faced with data from an appraiser, the mortgage company will often eliminate the PMI with little anxiety. At that time, the home owner can enjoy the savings from that point on.